The Increasing Impact of Basic Tenets of
Financial Analysis on Hospital Productivity
Hospitals are in the midst of a period of profound economic crisis, a time when many health care institutions are earning less and their staffs and administrations are feeling insecure about their futures (Sherman, 1990; Clare, Sargent, Rhodes, & Thane, 1995; Cooper & Kaplan, 1991; Wyszewianski, Thomas, & Friedman 1987). As Bard suggests, "the American health care system is facing very critical times. We are closing in on annual expenditures of almost one trillion dollars a year. The system needs direction and effective change" (Bard, 1994, 398). And yet few managers and physicians feel they truly understand this New Economic Order so they are feeling disenchanted and, in a sense, locked out of an industry to which many have devoted their entire lives (Ellis, McGuire, 1996; Long, Chesney, & Fleming, 1989; Young, 1995) . Productivity management is the key element in this discussion.
To come to a closer understanding of that productivity concept, it will be detailed in four main sections. The first section will analyze the growth of prospective payment systems (PPS) and the impact that those systems have on the hospital industry. The second section will provide an analysis of the hospital industry's traditional historical productivity records and suggest those steps necessary to rethink those productivity records. The third section will analyze how traditional concepts of care have changed, and are changing, in light of the PPS situation. The fourth section will quantify the affects that the concept of Total Quality Management has on hospitals. It will be seen through this study that the above areas of analysis will create a framework for discussion that will enable the health care community to have one more articulate tool to give hospital groups more information to educate themselves, at their own pace, on key economic and soci...